The US Federal Reserve's $85 billion of monthly bond purchases have kept U.S. interest rates low to encourage economic recovery, but also sent a flood of money into stock markets worldwide in search of higher returns.

There are concerns that ''cheap money'' has inflated stock prices beyond their rightful value and so prices have been volatile lately as investors try to gauge the impact of any Fed `tapering.'

But on Wednesday, a day after most markets were down, investors seemed to find new confidence that the Fed will maintain its current level of purchases.

''Tapering is likely the only thing on most investors mind today,'' said Alex Conroy, financial sales trader at Spreadex.

Conroy added that Wednesday's higher stock prices ''would suggest investors are again attempting to position themselves for no taper. If the last few months are anything to go by, expect huge volatility today as investors attempt to get ahead of the Fed.''

In Europe, investors were also encouraged by signs the Germany economy is picking up steam. The Ifo institute's closely watched business confidence index climbed to 109.5 points this month from 109.3 in November - a signal managers anticipate faster economic growth in the new year.

In afternoon trading, France's CAC-40 was up 0.9 percent to 4,103, while Germany's DAX rose 1 percent to 9,179. The FTSE index of British shares climbed 0.2 percent to 6,502.

Wall Street opened higher. The Dow Jones industrial average was up 0.3 percent to 15,926 while the broader S&P 500 index rose 0.2 percent to 1,784.

The dollar's near term fortunes will likely rest on what the Fed does. It was trading fairly flat in the run-up to the decision, with the euro down 0.1 percent at $1.3761.